4 ms·

Isn't "pivoting" a huge drain on a startup though? You throw away a few months of code and have to create another product. It just cuts into your runway, so muc

by ehsanul 16y ago

Isn't "pivoting" a huge drain on a startup though? You throw away a few months of code and have to create another product. It just cuts into your runway, so much better to get the right product as early as possible, through early customer development.

lsc 16y ago
Yeah, this is what I don't understand. so when do you cut your losses, close down the company, and move on to your next venture? I mean, I understand about pivoting. when I first started I blew a bunch of money building a setup to sell storage, then amazon s3 turned that market upside down. (as an aside, I'm considering that market again. S3 is still here, and it's still pretty good, but it's prices are way higher now, relative to hardware and bandwidth costs, than they were then.) I pivoted fairly quickly to FreeBSD chroot jails, which also didn't do so well, and then to Xen VPSs, which worked okay, though it took me another few years before I got the formula completely right. The thing was, I blew through a significant amount of money (well, significant to me; we're probably not talking about more than two porsches of consulting income) but if I had used other people's money, they would have owned quite a lot of the company. and other than my own experience and knowledge, the money spent before a pivot doesn't really help after a pivot. (I mean, the experience and knowledge matter a lot, but bankruptcy court can't take that away) Now, from my perspective (I own my company wholly; no investors, any company commitments and/or debit are co-signed by me personally) unless I'm willing to declare personal bankruptcy, there isn't much difference between shutting down the company and starting a new every pivot, vs. keeping the company the same every pivot. However, I did spend some significant money. If I was using investor money, wouldn't it make sense for me the founder to close the business and start a new one, thus either retaining more equity or gaining more capital (if I got new investors) I mean, obviously, if you do that from one very similar business to another, you are going to probably have legal problems, and at the very least damage your reputation amongst potential investors. But, take for example, my first pivot. Going from selling raw storage to selling shell accounts could reasonably be said to be a completely different business. I don't think investors would blame me for failing to anticipate amazon would swoop in with a price point I couldn't beat, and I don't think they'd hold it against me if I decided to start another company later, selling chroot shell accounts. How does that usually work? what motivates the founder to stick with the existing investors when the business must 'pivot' to something unrelated to it's original intent?
- sblom 16y ago
  "cut your losses, close down the company, and move on" only works if you have no investors, or if you end up on the verge of bankruptcy. While there are investors around, they'll be looking for pieces of the IP portfolio that they can carve off and auction away or for teams of developers that can be sold as a capability to a company that needs help doing what your startup did. As for "what motivates the founder to stick around", the only things I can think of are continuing opportunity to take what you have an make it successful, mercenary compensation, or protecting your ownership through continuing vesting. If none of those apply, and you don't like the direction the investors want to go, you might be parting company with them.
SoftwareMaven 16y ago
If you don't have a fairly good idea of what your market looks like, you shouldn't be spending money yet. I sometimes wonder if "pivot" is too strong of a term. If you are making 180 degree "pivots" after you've ramped up development, you are in trouble. On the other hand, if you are making those kinds of corrections before spending money, then start making 10-20 degree pivots after you've started spending some money, you'll be OK. By the time you want to SCALE (and really spend some money), your pivots are 2-3 degree, which really means things like messaging/marketing tweaks, fine tuning for your buyer personas, etc. I think of it like a system moving towards a steady state. It may bounce around for while, but whole time it moves towards the steady state and the oscillations decrease each time. Pivoting and customer development are synonymous. The whole point of pivoting is to change the direction of your efforts based on what your (potential) customers are telling you.

by ehsanul 16y ago

lsc 16y ago

Yeah, this is what I don't understand. so when do you cut your losses, close down the company, and move on to your next venture? I mean, I understand about pivoting. when I first started I blew a bunch of money building a setup to sell storage, then amazon s3 turned that market upside down. (as an aside, I'm considering that market again. S3 is still here, and it's still pretty good, but it's prices are way higher now, relative to hardware and bandwidth costs, than they were then.) I pivoted fairly quickly to FreeBSD chroot jails, which also didn't do so well, and then to Xen VPSs, which worked okay, though it took me another few years before I got the formula completely right. The thing was, I blew through a significant amount of money (well, significant to me; we're probably not talking about more than two porsches of consulting income) but if I had used other people's money, they would have owned quite a lot of the company. and other than my own experience and knowledge, the money spent before a pivot doesn't really help after a pivot. (I mean, the experience and knowledge matter a lot, but bankruptcy court can't take that away) Now, from my perspective (I own my company wholly; no investors, any company commitments and/or debit are co-signed by me personally) unless I'm willing to declare personal bankruptcy, there isn't much difference between shutting down the company and starting a new every pivot, vs. keeping the company the same every pivot. However, I did spend some significant money. If I was using investor money, wouldn't it make sense for me the founder to close the business and start a new one, thus either retaining more equity or gaining more capital (if I got new investors) I mean, obviously, if you do that from one very similar business to another, you are going to probably have legal problems, and at the very least damage your reputation amongst potential investors. But, take for example, my first pivot. Going from selling raw storage to selling shell accounts could reasonably be said to be a completely different business. I don't think investors would blame me for failing to anticipate amazon would swoop in with a price point I couldn't beat, and I don't think they'd hold it against me if I decided to start another company later, selling chroot shell accounts. How does that usually work? what motivates the founder to stick with the existing investors when the business must 'pivot' to something unrelated to it's original intent?

sblom 16y ago
"cut your losses, close down the company, and move on" only works if you have no investors, or if you end up on the verge of bankruptcy. While there are investors around, they'll be looking for pieces of the IP portfolio that they can carve off and auction away or for teams of developers that can be sold as a capability to a company that needs help doing what your startup did. As for "what motivates the founder to stick around", the only things I can think of are continuing opportunity to take what you have an make it successful, mercenary compensation, or protecting your ownership through continuing vesting. If none of those apply, and you don't like the direction the investors want to go, you might be parting company with them.

SoftwareMaven 16y ago

If you don't have a fairly good idea of what your market looks like, you shouldn't be spending money yet. I sometimes wonder if "pivot" is too strong of a term. If you are making 180 degree "pivots" after you've ramped up development, you are in trouble. On the other hand, if you are making those kinds of corrections before spending money, then start making 10-20 degree pivots after you've started spending some money, you'll be OK. By the time you want to SCALE (and really spend some money), your pivots are 2-3 degree, which really means things like messaging/marketing tweaks, fine tuning for your buyer personas, etc. I think of it like a system moving towards a steady state. It may bounce around for while, but whole time it moves towards the steady state and the oscillations decrease each time. Pivoting and customer development are synonymous. The whole point of pivoting is to change the direction of your efforts based on what your (potential) customers are telling you.